Fitch Ratings has stated that in order for the United States to regain its top rating, there needs to be a significant improvement in governance. This comes after Fitch downgraded the country’s long-term foreign currency issuer default rating from AAA to AA+ earlier this week, which caused global stock markets to decline.
The decision to downgrade the rating was made after Fitch placed the country’s rating on negative watch in May due to concerns over the debt ceiling issue. Richard Francis, Fitch’s co-head of the Americas sovereign ratings, explained that there has been a steady deterioration in the key metrics for the United States over the years. In 2007, the general government debt was less than 60%, but now it has risen to 113%, highlighting the clear deterioration.
Francis also pointed out that fiscal deficits are expected to rise in the next three years and that the debt is projected to continue increasing. He attributed the downgrade to the constant brinkmanship surrounding the debt ceiling among both Republicans and Democrats, which has hindered the government from effectively addressing the growing fiscal issues, particularly those related to entitlement programs like Social Security and Medicare.
To regain the top rating, Fitch will be monitoring for a long-term fiscal solution that addresses the problems with entitlement programs. This includes a willingness to examine both the revenue and spending side of these programs. Additionally, Fitch will be looking for a reduction in the deficit and for the government to address the debt ceiling issue by either suspending or eliminating it.
Francis emphasized that given the high level of debt, increasing deficits, and the deterioration in governance, Fitch no longer sees the United States as deserving of the AAA rating.
The downgrade by Fitch has raised concerns about the country’s economic stability and has had a negative impact on global stock markets. However, it also highlights the need for the U.S. government to address its fiscal issues and improve its governance in order to regain the trust and confidence of rating agencies and investors.
It is important for the government to come up with effective solutions to manage its debt and reduce the deficit, as well as to address the ongoing issues surrounding entitlement programs. By demonstrating a commitment to fiscal responsibility and good governance, the United States has the potential to regain its top rating and strengthen its position in the global economy.
In conclusion, Fitch’s downgrade of the United States’ rating highlights the need for improved governance and fiscal management. The government must address the growing fiscal issues, particularly related to entitlement programs, and demonstrate a commitment to reducing the deficit and managing the debt. By doing so, the United States can regain the trust and confidence of rating agencies and investors, and strengthen its economic position in the global market.